Singapore: Tax Evasion = Money Laundering

The authorities are keen to ensure the city-state is not seen as a tax haven for the wealthy from Europe, China, Indonesia, Malaysia and elsewhere without dulling its allure as an oasis for the rich, replete with casinos, luxury properties and high-end boutiques and restaurants. More than 70 percent of Singapore's S$1.34 trillion ($1.08 trillion) in assets under management at the end of 2011 came from overseas, an MAS survey showed.

SINGAPORE: Banks in Singapore are urgently scrutinizing their account holders as an imminent deadline on stricter tax evasion measures forces them to decide whether to send some of their wealthiest clients packing.

The Southeast Asian city-state has grown into the world's fourth-biggest offshore financial center but, with U.S. and European regulators on the hunt for tax cheats, the government is clamping down to forestall the kind of onslaught from foreign authorities that is now hitting Switzerland's banks.

Before July 1, all financial institutions in Singapore must identify accounts they strongly suspect hold proceeds of fraudulent or wilful tax evasion and, where necessary, close them. After that, handling the proceeds of tax crimes will be a criminal offence under changes to the city-state's anti-money laundering law.

"Because of banking secrecy, Singapore used to be an attractive place to put money if you didn't want the authorities back home to know about it," said Erik Wilgenhof Plante, head of compliance at Germany's DZ Privatbank in Singapore.

"That has left legacy problems for some banks."…

...Banks in Singapore already have strict controls to guard against handling money from crimes such as drug trafficking and corruption but have never had a legal obligation to report on tax evaders - unlike rival financial centre Hong Kong....

...New foreign clients may find that banks become far more picky and inquisitive as the change in mindset takes hold.

"The good old times in Singapore are over," said the European banker. "We don't need that dirty money anymore."

Legacy problem…I like that.

“High-risk” accounts must be terminated by June 30 this year – banks will have another year to review all other accounts.

While I doubt this will put much of a dent in illicit capital flows going through Singapore, it’s going to be a little tougher than it used to be.

I thought that was reserved for certain politicians who have exceeded their "sell by" dates and their assorted fellow travellers and hangers-on. Par for the course as far as these worthies are concerned.

But from a professional economist? Where's the rigorous analysis? Where are the views of Singapore-based economists, of whom you should know a fair number?

I noted that the authorities are cracking down on a loophole in their regulatory regime, one that is long overdue. The title of the post refers to Singapore's future approach to this issue - henceforth, banks taking funds from individuals for the purpose of tax avoidance would be subject to prosecution under Singapore's already existing money-laundering laws.

I fail to see anything objectionable about this.

As far as illicit capital flows is concerned, I've already satisfied myself (I reproduced their analysis and arrived at close to the same figures) that the Global Financial Integrity report on these flows is largely correct with respect to trade related capital flows (a.k.a. transfer pricing abuses), which form about 80% of the "illicit" capital flows in the region.

With respect to Malaysia-Singapore trade the flow is all one way, both in import and export mispricing. The discrepancies are quite substantial (between 40% to 100%).

Sorry to see you mate being lambasted by nincompoop morons for merely reporting the truth. That's anathema to certain low class, narrow minded, deluded ethnics. To recycle an oft quoted cliche ; 'par for course' for idiots and mongoloids.

Personally, I don't think the latest move amounts to anything more than an eyewash sandiwara. They have to do something as the US State Dept annual report on money laundering does not make good reading at all. In fact, its abysmal when the country report is perused regarding prosecution/investigation ratios. If I recall correctly, in 2012, 11k investigative files were opened and only 30 or so prosecutions. Back then the SD cited this lack of prosecution as indicative of lax enforcement and even collusion.

But then the Sporks are caught in a bind. Do nothing and they still remain on the red list. Do something and the money runs away. I reckon they will sit tight. After all, money laundering, tax evasion has been the lifeblood of the economy, something Morgan Stanley head honcho, Andy Xie revealed in 2006 , something affirmed by the Indian Parliament's White Paper on ML and something easily verifiable by looking at UNCTAD figures on investment flows. You don't reckon all those agencies from SD to UNCTAD got their facts wrong do you, unless you are deluded too. And if that's the case, then all data is crap from IMF, to the World Bank's to AdB's and we might as wel close shop for one can't have it both ways, can you?

And before the douchebag comes running citing good Us Spork diplomatic relations, that was the case between the US and the Swiss. Put simply, jurisdictional and legal issues are independent of foreign policy and strategic interests, ask the IRS that.

I am rather surprised you dint comment on Prof Balding's latest revelations. In fact,that guy challenged the Sporkians but the silence is deafening.

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About Me

An applied and practicing economist in the Malaysian financial sector.

The purpose of this blog was first to have a way to put down and present my ideas, work in progress, and thoughts on the Malaysian economy. The second reason was to hopefully attract critiques and feedback, that would help me improve on my own understanding of the way the world works, or at least, this little corner of it.